Fancy Fast Food

Wendy’s recently introduced a new store prototype, including features like lounge seating, fireplaces, and WiFi.

The days of dingy, dull, and outdated fast-food joints may soon be a thing of the past. Quick serves are meeting the demands of an evolving consumer base to remain competitive with the fast-casual sphere, using everything from sleek interiors with comfortable booths and flat-screen televisions to healthy, fresh food and drink offerings.

“Consumers’ expectations are growing … and therefore their demands grow,” says Denny Lynch, senior vice president of communications at Wendy’s. “They are more mobile than they have ever been. They travel and see different parts of the country, they see different cities and restaurant chains, so they have a lot more touch points and things to consider.”

To meet this demand, Wendy’s last year introduced a $10-million-plus prototype, which it considers the future store model. The first restaurants were built to act as laboratories to perform consumer research and measure consumer attitudes toward upgrades and transformations.

The units feature a contemporary design, multiple seating options—including lounge chairs next to a fireplace—and technology like WiFi and flat-screen TVs.

“It’s all about staying relevant with today’s consumer,” Lynch says. “If you have two restaurants within a block of one another—one is brand new and the other is 20 years old, and you like the food at both places—which one do you think you will visit
more often?”

According to Technomic, a Chicago-based consulting firm, Wendy’s evolution is a result of the shift in market share between limited-service and full-service segments over the last decade. Limited-service restaurants, which owned about 47 percent of the market 10 years ago, now control 53 percent of the market.

This trend has caused fast-food restaurants to work “overtime to upscale their menu and concept positioning—not only to keep pace, but to compete directly with fast-casual leaders,” Technomic states in a recent report that explores the blurring of fast-food and fast-casual restaurants.

“The key to limited-service restaurant growth is differentiation,” says Technomic executive vice president Darren Tristano. “Many limited-service restaurants that have demonstrated growth have a broad consumer appeal, yet each has a discerned approach. Consumers are looking for fresh, better-quality ingredients, a contemporary décor and ambiance, and interactive service formats to offer something unique and enhance the customer experience.”

Evidence of this trend can be found throughout the quick-service restaurant landscape as huge players in the market upscale their menu. Taco Bell’s Cantina Bell menu, for instance, consists of higher-quality items such as gourmet bowls and burritos.

Taco Bell partnered with celebrity chef Lorena Garcia for the menu initiative, which includes new ingredients—like whole black beans, citrus and herb–marinated chicken, and cilantro rice—all to satisfy a consumer base that has become more sophisticated.

“We are constantly listening to our consumers, and one of the things they told us is that they want a more relevant Taco Bell,” says Taco Bell spokesman Rob Poetsch. “This, along with the key insight that consumers are increasingly looking for food as an experience, not just food as fuel, will further drive our business.”

Other large quick-service chains, such as Arby’s, Burger King, and McDonald’s, have focused on upgrading their menu, their stores, or both. Burger King recently launched a Fall Premium Chicken Menu, while McDonald’s is continuing its billion-dollar makeover of the majority of its stores.

“We’ve seen McDonald’s do a tremendous amount inside and outside the restaurant to contemporize,” Tristano says. “We are going down to that inside-dining experience, which will make [quick service] more competitive with fast casual.”

Though it’s routine for quick serves to upgrade stores and menus, it occurs largely on an incremental basis. The McDonald’s makeover isn’t expected to be complete until 2015, and Wendy’s will gradually build new restaurants in the coming years.

The next phase of the Wendy’s project involves building about 50 restaurants, costing nearly $750,000 a piece, that will reflect consumers’ interests, needs, and desires.

“It’s an ongoing process. You don’t get it all done in one year,” Lynch says. “It takes a fair amount of time to build them, to do the necessary consumer research, and determine what the elements are that you are going to go forward with and what the elements are you are going to pass on.”

One of the overriding factors in deciding whether to upgrade stores and menus is franchising. Given the capital investment needed to complete the project, franchisees pose a wrinkle in the process of redesigning stores.

Other factors that play a role in a store’s upgrade are the age of the existing unit and the financial health of the chain, Tristano says. McDonald’s has gone with remodeling existing restaurants, while Yum! Brands has built new locations because of the age of some of its units.

“It’s across the board, but I think the most common is the remodel versus the rebuild … because it’s less expensive and a bigger bang for the buck,” Tristano says. “With the 20-plus-year-old restaurant, there are incredible efficiencies that you create by rebuilding the restaurant from logistical, space, planning, and new equipment [standpoints].”

As major chains upgrade their menus and stores, Tristano says, they must remember that they’re still fundamentally in the quick-service business. “Consumers are going to make choices on price as to what is and isn’t affordable to them,” he says. “Customers’ expectation of [quick service] is still going to be a one to three minute mark. … Fast casual will always have the advantage of quality of food, and [quick service] will always have the advantage of price and convenience.”